Luhut announces plan to remove fuel subsidies by 2027

Luhut Binsar Pandjaitan, Chairman of Indonesia's National Economic Council (DEN), revealed that the government plans to remove fuel subsidies by 2027. He outlined that, going forward, subsidies will no longer be based on commodities but will be provided directly to eligible recipients, similar to the Direct Cash Assistance (BLT) program.

"Within two years, we aim to transition toward a single fuel price, eliminating subsidies for items like diesel fuel. Subsidies will instead be targeted at individuals who qualify," Luhut said on Thursday, February 20, as reported by detikFinance.

Luhut also mentioned that he has discussed this plan with President Prabowo Subianto. The shift is expected to save the government trillions of rupiah.  “This approach will allow us to save billions of dollars,” he added.

Luhut emphasized that technology will be integral to the new subsidy distribution system, with artificial intelligence (AI) helping ensure that only eligible recipients receive subsidies. "We now have technology that allows Pertamina to identify which vehicles are entitled to specific types of fuel based on their license plates. Some vehicles qualify, while others do not. I believe this system will work," he said.

Read also : Govt conducts comprehensive review on fuel, electricity subsidies

New subsidy scheme still under review

Meanwhile, Minister of Energy and Mineral Resources (ESDM) Bahlil Lahadalia indicated that the details of the new fuel subsidy scheme are still being finalized. He noted that only 1% of the distribution system remains before it can be implemented.

"The fuel subsidy scheme is not finished yet; there's still 1% left," Bahlil told reporters on February 3.

One of the proposed models for the subsidy scheme is a BLT-style distribution. However, Bahlil emphasized that a final decision is pending, as it ultimately rests with President Prabowo.

"One potential formulation is similar to BLT. But I can’t announce it yet. The official announcement will depend on the President's decision," he added.

Editing by Reiner Simanjuntak